National Buildings Construction Company (NBCC) has won a Rs 10,000-crore order to develop 10,000 residential flats on a 240-acre land parcel owned by the Central Public Works Department (CPWD) near Vasant Kunj in South Delhi.
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NBCC has proposed to construct and market 30 percent of the total built-up area to generate revenues for construction of the entire complex. The project, to be called Vasant Kunj Extension, is estimated to come up in 5-6 years.
The company will receive 10 percent fee on the construction cost and an additional 2 percent for sale and marketing activities for the project, said CMD Anoop Kumar Mittal said.
He expects to receive the government approval in the next 6 months.
NBCC's current total orderbook stands at around Rs 16,000 crore, of which 95 percent belongs to the project management consultancy (PMC) division.
Currently, real estate contributes around 10-15 percent to the company's revenue, but NBCC is targetting a 20 percent revenue growth, around Rs 4,500 crore, in FY14-15.
Below is the interview of Anoop Kumar Mittal, CMD, NBCC with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: How much does the real estate business contribute to your overall revenue stream and more about the project as well?
A: Our real estate business is contributing almost 10-15 percent average in our total business. We are in three verticals – Project Management Consultancy (PMC), real estate and engineering, procurement and construction (EPC) contract. EPC contract is contributing about 3-4 percent and remaining is PMC job, so this is our business model.
As far as this project is concerned, this is 240 acre land which belongs to Central Public Works Department (CPWD) in Ghitorni which is next Vasant Kunj in south Delhi. However, six months back we have signed an agreement with CPWD where we will execute this project together; National Buildings Construction Corporation (NBCC) and CPWD. NBCC's role will be to construct and market 30 percent of total build-up area in the market to generate the revenue for construction of entire complex.
This project is under approval of government and we expect that in next six months we may get an approval from the ministry of finance and Government of India.
Latha: How much money will you make if you were to construct all these 10,000 flats and what margin you will make?
A: Our margin is 10 percent of our construction cost and 2 percent on total sale value.
Latha: In this case how much will it work out to?
A: We have not worked out because this is still in approval stage.
Latha: What is the order book you have in your PMC division and therefore FY15 can see what kind of growth?
A: As on date the order book is about Rs 16,000 crore and 95 percent is PMC and remaining 5 percent is either EPC or some miscellaneous jobs. We see good growth in '14-15.
Latha: Will Rs Rs 16,000 crore be done in FY15?
A: Not at all. It takes around three years.
Sonia: What kind of margins do these development of colonies generally bring about, is it higher than standalone projects, would it be to the tune of 8-10 percent or do you think it could be higher?
A: Generally in redevelopment of government colonies we get 10 percent fee from Government of India for our profit and our overheads and now we are also charging 2 percent marketing charges for sale of commercially exploitable property.
Latha: This is over and above that 10 percent?
A: Yes, over and above.
Sonia: On this specific order what is your share that you will receive on the 10,000 crore order?
A: NBCC will develop 30 percent property and will sell in market. We will get 10 percent on construction cost and 2 percent on market charges for sale of value.
Sonia: What are the other real estate projects that you have in the pipeline this year?
A: We have few projects in pipeline; real estate like one project in Ghaziabad, Lucknow, Faridabad and two projects in Jaipur, two projects in Alwar. So that kind of mixture we have real estate projects.
Latha: What can we assume as revenue growth for FY15?
A: FY14-15 we are targeting 20 percent growth in revenues.
Latha: What might that be – over Rs 4,500 crore?
A: Maybe.
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